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NDP’s Liabilities Have Been Revealed By Administrators
December 15, 2016

A transport company and milk processors Warrnambool Cheese and Butter (WCB) and Tatura Milk are among unsecured creditors, owed money by failed Victorian broker, National Dairy Products.

NDP administrators have told unsecured creditors they could expect as little as five cents in the dollar, under a deed of company arrangement (DOCA).

In a letter to unsecured creditors, joint and several administrators Salvatore Algeri and Glen Kanvesky said if NDP was declared insolvent, they could expect nothing, or just over a cent in the dollar.

Deloitte found the company had liabilities of $9.2 million, made up largely of $4.3m to unsecured creditors and a further $4.7m owed to former managing director, Tony Esposito, as an unsecured loan

Among those owed substantial amounts of money include Warrnambool Cheese and Butter (WCB), $479,756, Peter Stoitse Transport, $1.35m and Tatura Milk, $197,000.

The letter to creditors also said dairy farmers were also owed sums of up to $1.1m, in projected claims.

The administrators found the company had never operated profitably, incurring year-on-year losses from 2015.

“This appeared to be primarily due to an inability to negotiate profitable pricing with suppliers and customers, which, as a result, negatively impacted the company’s margins,” Mr Algeri and Mr Kanvesky said.

“The company was also impacted by a high overhead structure and generally poor management,” they said.

Management had advised the administrators the company’s start up strategy was to establish and secure a supplier base by offering better pricing, than its competitors.

“This meant agreeing to inflated pricing with its suppliers, which was to be renegotiated, at a later date.

“This resulted in higher cost, incurred in financial year 2015, being the primary driver of the company’s net loss.”

The administrators said management had agreed to continue paying the higher prices, to maintain supply agreements.

Last month, Mr Esposito blamed NDP’s financial woes on major processors, Fonterra and Murray Goulburn (MG) undercutting him.

He also claimed the big two had poached his suppliers, by offering them deals – a claim denied by Fonterra.

Mr Algeri and Mr Kanvesky told creditors Mr Esposito and director Violetta Esposito proposed the establishment of the DOCA.

They also said they believed Mr Esposito may have been acting as a shadow director.

“Our investigations have disclosed Antonio Esposito was declared bankrupt, pursuant to a sequestration order against his estate,” the administrators said.

The sequestration order was set aside by the Federal Court, in May, which also lifted the bankruptcy.

Violetta Esposito remained as NDP’s sole director.

“Further, our investigations to date have revealed that while Ms Esposito was the director of the company, after Mr Esposito’s resignation, all daily decisions regarding the operation and general running of the business appeared to still be under the control of Mr Esposito,” Mr Algeri and Mr Kanvesky said.

“There is evidence to suggest that Mr Esposito’s conduct, following his resignation as a director, resulted in him still being a shadow director, within the meaning of the Act.”

They said, despite repeated requests, they had not been able to meet with Ms Esposito.

“Ms Esposito provided written reasons for the company’s financial difficulties, which were as follows – the loss of approximately six farms, which represented more than 80 per cent of the company’s milk supply, over a two day period, and the continuing discounting of milk by Murray Goulburn, which is a customer of the company

The Australian Securities and Investments Commission (ASIC) website points out even if someone is not formally appointed as a director, he or she may still be subject to the same duties and liabilities of that position.

“If you act as a director or give instructions to the appointed directors on how they should act, you may be considered a ‘shadow director’,” the website said.

“Shadow directors can still be liable for breaches of the laws relating to directors’ duties, even though they were never formally appointed as a director of the company.”

Mr Esposito said he had not yet read the letter to the creditors.

When asked if he had been acting as a shadow director, he said:

“I don’t know if that’s the case, I was working as a manager of the business, but as a shadow director, I don’t know.”

By: Andrew Miller
Source: ADF.farmonline.com.au


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